Self-employed affordability options improving in 2021

Rozi Jones
22nd February 2021
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"Whole of market affordability research is essential in helping brokers secure the best outcomes for their clients, especially self-employed clients"

There is now at least one lender available to meet the loan requirements of self-employment mortgage applicants on 71% of cases, according to the latest research from MBT Affordability.

The data found that 71% of self-employed cases processed through MBT Affordability in January were affordable, 27% were deemed to be unaffordable based on the clients’ required loan amount, and lenders were unable to lend on just 2% of cases.

The average maximum loan offered to self-employed mortgage applicants was £221,400 in January – a fall of just over 3% from its peak last August. The minimum average loan available to the self-employed also recovered to £118,800 in January. This represents an increase of 45% on its lowest point, which was last April, and a rise of just over 43% on November.

However, it is still markedly more difficult for self-employed borrowers to achieve their requested loan size than employed borrowers. Whereas 71% of self-employed cases were found to be affordable, across the whole of the market, 80% of cases were affordable in January, which was up from 76% in December. There was at least one lender able to meet the loan requirements of 86% of first-time buyers and 86% of remortgage customers, while 82% of home mover cases were affordable.

Tanya Toumadj, CEO at Mortgage Broker Tools, said: “The latest MBT Affordability Gap data confirms that it is more difficult for self-employed clients to achieve their requested loan size, but that it is still possible, with the right research.

“There is a clear warning for brokers within the data. On the cases where there were no options available based on affordability, the difference between the loan requested and maximum loan offered was 25% and this is the highest level we have known in any category since records began. For brokers who only try one or two lenders, this can give a false impression that they will not be able to achieve the required loan amount, even though they data says they probably will be able to do so if they shop around.

“This is why whole of market affordability research is essential in helping brokers secure the best outcomes for their clients, especially self-employed clients where calculations can be more complex and more varied. A platform like MBT Affordability can make this process quick and easy, helping brokers to identify the lenders that will be most able to help their clients meet their objectives.”

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